The Party's Over; Why Plan Like It's 1999?
CFO (11/02) Vol. 18, No. 12 p.20; Newell, Gale E.; Kreuze, Jerry G.; Hurtt, David

Critics complain that investment return assumptions and interest rate assumptions are outdated and that pension plan sponsors need to update them to reflect current conditions. Stephen Church, president of Piscataqua Research, says plan sponsors have become more aggressive over the years, noting the fact that both interest rate assumptions and investment return assumptions are inflated. The problem, according to Church, is that plan sponsors are overstating interest rates by 1 percent to 2 percent. This means that companies like General Motors, which earlier this year contributed $2.2 billion to its pension fund, still owes about $20 billion.


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